The Illogic of the McConnell Debt Limit Rule

In the aftermath of the recent government shutdown and the painful negotiations that brought the country perilously close to defaulting on government debt, policy experts are searching for a way to avoid a replay of this crisis.

After all, the recent congressional agreement only delays the next potential shutdown till January 15 and lifts the debt ceiling only until February 7.

While many Republican officials were willing to breach the debt limit, most economists and policymakers agreed that deliberately defaulting on the government debt would be an historic mistake, with long-lasting negative consequences. Even cutting other spending while paying bondholders would have carried significant downside risks.

What should be done to avoid another flirtation with default? (Let’s leave avoiding a shutdown for another day.) Some commentators, most recently the New York Times have proposed making the so-called “McConnell rule” the law of the land. The idea, named after Senate GOP Leader Mitch McConnell (R-KY), would allow the President to raise the debt ceiling unilaterally. Congress’s role would be limited to voting its disapproval of that increase. (McConnell’s suggestion to do this this was made originally in the context of a broader discussion that linked spending cuts to debt limit increases, but now his name has been applied to this part of his overall proposal.) This is essentially how debt ceiling issues were resolved earlier this year.

But making the McConnell rule law would be a mistake. It would enshrine the irresponsibility of all of those elected officials who have said they would never raise the debt limit to continue avoiding the responsibility for their actions. And it is based on a misunderstanding of why the debt ceiling has to be raised periodically.

Congress does not raise the debt ceiling periodically because the President likes the idea. Congress must increase it in response to actions (such as spending authorizations and tax laws) it has already taken. Allowing the president to raise the debt ceiling (because Congressional actions made it necessary) so Congress can then vote its disapproval makes no more sense than having Congress require the President to order a pizza and then vote to object that it has too many calories.

Forget about the animosity and mistrust between House Republicans and Obama. Just think about the Congress and the executive branch of government. The Constitution indicates that the government can not spend money, raise revenues or borrow funds without prior congressional approval. But when Congress OKs a budget where revenues are not sufficient to pay for spending (which it has done year after year for decades—with just a few exceptions) it does not concurrently approve the debt measures needed to fill the gap.

So, for example, Congress can legislate $100 in spending and $60 in taxes, but this does not automatically enable government to borrow the $40 difference. It can only do that by raising the debt ceiling. Implementing the McConnell rule would be asymmetric in that it would let the President authorize borrowing independently of Congress, but not revenues or spending.

A better solution would be to stipulate that when Congress authorizes spending, it is also authorizing the borrowing needed to finance that spending should tax revenues be insufficient. Like the McConnell rule, this would avoid showdowns over the debt limit. Unlike the McConnell rule, it would be consistent with the constitutional authority given to the Congress and it would require members of Congress to actually take responsibility for their actions and acknowledge that whatever spending they authorize does in fact have to be financed.

Posts and Comments are solely the opinion of the author and not that of the Tax Policy Center, Urban Institute, or Brookings Institution.